How Microsoft Will Profit Off Webmail Without Reading Your Inbox

Share

How Microsoft Will Profit Off Webmail Without Reading Your Inbox

No doubt about it: Outlook.com looks great. The user interface for Microsoft's just-announced Hotmail overhaul is crisp and clean�I'm a sucker for whitespace. The social and Skype integrations seem winning, and the newsletter filter looks like inbox salvation. Here's the kicker: When you sign up, before you even see your inbox for the first time, Microsoft makes this promise:

"Outlook is private—you’re in control of your data, and your personal conversations aren’t used for ads."

Microsoft is taking a direct swipe at Gmail, which scans emails to target users with ads related to the content of the messages. The practice has alienated some potential users ever since Gmail launched in 2004, despite Google's assurances that the automated process doesn't compromise their privacy. By promising not to read your email, Microsoft clearly sees greater privacy as a selling point to lure those put off by what they see as Gmail's prying eyes.

Yet on the Web, more effectively targeted advertising is the billion-dollar pitch. It's the core business of both Google and Facebook. If Microsoft isn't offering the contents of Outlook.com users' emails so ad buyers know what to sell to whom, what is the company offering beyond sheer volume of eyeballs? (Hotmail had nearly 325 million unique visitors worldwide in June, according to comScore�more than any other webmail service.)

'We see our users as customers, not inventory.' — Microsoft

In response to questions from Wired on Wednesday, Microsoft did not elaborate on the specifics of how it deploys ads in Outlook.com. In her review Tuesday, Wired Gadgetlab reporter Alexandra Chang said the ads still seemed somewhat tailored to her: "When I was using Outlook.com, a bunch of gadget deals and one flower ad appeared, which seemed pretty accurate to my digital profile." Bruce Hall, general manager of Windows Live and Internet Explorer, told her Outlook.com would rely on its newsletter filter, which grays out mailing-list messages you likely never read, to engage in some modest ad-targeting based on the newsletter's sender.

Such restraint indicates webmail ads don't matter so much anymore anyway, given the volume of email exchanged on mobile platforms. If you sync your Hotmail, Gmail or Yahoo mail through the iPhone's mail app, for instance, you don't see any ads in your inbox. Your webmail provider becomes just another server and the suffix to your email address.

Microsoft itself suggests that ad sales were not the crux of its business strategy. Most Outlook.com users likely will already be Microsoft customers, who as buyers of its software are the main source of the company's revenue, a company spokesperson told Wired in a statement Wednesday. "We see our users as customers, not inventory," the spokesperson said.

In another sign that Microsoft isn't looking to its revamped email service mainly as a platform for ads, the company said Outlook.com was not being overseen by its money-losing online services division, which includes Bing and MSN. Instead, Outlook.com's launch was announced by Chris Jones, the head of Microsoft's Windows Live division, which makes web apps for Windows. This comes just weeks after Microsoft CEO Steve Ballmer came to San Francisco to unveil the new version of Office, which posted nearly $24 billion in sales during Microsoft's most recent fiscal year. Microsoft has deeply integrated the cloud into Office 2013, which will offer monthly subscription-based access. Microsoft is also looking for ways to turn SkyDrive and Skype into moneymakers. In that light, Outlook.com looks more like a gateway to selling software, not ads.

"There really is no new technology here," Gartner analyst Matt Cain says of Outlook.com. Microsoft is coming out with the new service not just to compete with Gmail, Cain says, but to create a portal that integrates all its cloud-based products and makes them appealing to everyday users: "Outlook.com represents reverse consumerization�taking a ubiquitous business tool and redrafting it for the consumer market."